DOD's Profit Policy and GAO's Proposal for a Program To Study the Profitability of Government Contractors

T-NSIAD-87-11: Published: Mar 18, 1987. Publicly Released: Mar 18, 1987.

Additional Materials:

Contact:

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

GAO discussed changes in the Department of Defense's (DOD) profit policy and a GAO proposal to study the profitability of government contractors. GAO found that the new DOD profit policy: (1) increases the potential profit for contractors that invest in facilities and equipment and reduces the emphasis placed on cost in determining negotiated profit; and (2) will probably achieve one of its principal objectives of reducing overall negotiated profit levels by 1 percent. GAO agreed that the DOD profit policy needs to stimulate efficient contract performance by placing increased emphasis on the use of capital investments. However, GAO questioned: (1) the method DOD used to calculate return on assets in its Defense Financial and Investment Review, which resulted in the understatement of defense industry profitability; (2) whether a 1-percent reduction in defense contractor profit will be sufficient to achieve comparability with other durable goods manufacturers; and (3) the lack of any requirement for periodic study to determine whether the profit policy is achieving its objectives. GAO believes that the government needs: (1) better and more timely assurance that profit policies are producing intended results; (2) access to actual contractor results and more frequent profitability studies; and (3) a consistent and generally accepted methodology to analyze data provided by government contractors.

Nov 22, 2017

Oct 31, 2017

Oct 27, 2017

Oct 26, 2017

Oct 16, 2017

Oct 10, 2017

Oct 5, 2017

Sep 29, 2017

Sep 28, 2017

Looking for more? Browse all our products here